Leaked BHP views follow Garnaut's PNG exit

ROSS Garnaut’s shock resignation from Ok Tedi Mining Limited has been followed by a leaked document suggesting the Papua New Guinea government tried to blackmail BHP Billiton.
Leaked BHP views follow Garnaut's PNG exit Leaked BHP views follow Garnaut's PNG exit Leaked BHP views follow Garnaut's PNG exit Leaked BHP views follow Garnaut's PNG exit Leaked BHP views follow Garnaut's PNG exit

Garnaut was pressured into quitting as chairman of OTML-affiliated trust fund vehicle PNG Sustainable Development Program in November, and decided to exit OTML after months of a subsequent travel ban brought forward by PNG Prime Minister Peter O'Neill.

"It is not possible for me to fulfil my responsibilities as chairman of this large, complex mining company for an indefinite period while the government is preventing me from travelling to PNG," Garnaut said in his resignation letter, according to The Australian.

O'Neill previously used parliament time, and his visit to Australia in December, to pressure BHP to surrender control of PNGSDP.

PNGSDP, based in Singapore, was set up by BHP in 2002 and took up the mining giant's 52% stake in OTML after it exited the country on the back of the environmental damage caused by the mine.

The investments-based company has an estimated $US1.4 billion of assets - including a lot of money firmly held in trust funds - and a 63.4% stake of the Ok Tedi mine, while the national and Western provincial governments own 18.3% each.

"Leverage" used against BHP

In April,PNGIndustryNews.net broke the story that BHP abandoned plans to re-enter PNG by trying to gain 40,000 square kilometres of exploration licenses.

On what happened, the best response served up by a BHP spokesman at the time was "that one of the reasons we decided not to proceed was our commitment to our high health, safety, environment and community standards".

What PNGIndustryNews.net did not publish at the time, was the industry rumour that the government asked BHP to hand over control of PNGSDP's Singapore trust funds as part of a deal to win the exploration licenses, with BHP refusing to do so.

Yet a recently leaked document has lent credence to this rumour.

According to the Australian Financial Review, a leaked Department of Foreign Affairs and Trade document revealed BHP said the travel ban on Garnaut sent a "very bad message" on conducting business in PNG.

The big miner reportedly further accused O'Neill of using improper leverage over those exploration licence applications it made in PNG.

"He [O'Neill] subsequently blocked our lease applications and made it clear they would only be granted if we transferred our rights [PNGSDP] to the government," BHP reportedly said in the leaked DFAT document.

Garnaut's involvement with PNG pre-dates independence in 1975. He was chairman of Lihir Gold before it was acquired by Newcrest Mining in 2010.

OTML is the single largest contributor to PNG's tax coffers in recent years.

According to PNG newspaper The National, ex public enterprises minister and former PNG PM Sir Mekere Morauta was nominated by the OTML board to replace Garnaut.

Morauta was appointed as Garnaut's successor as PNGSDP chairman last year, which surprised key PNG government figures at the time, according to an industry source.

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